Numerous iBuying companies entered the public markets last year Open door (NASDAQ: OPEN) is one of the most prominent participants. This company merged last year with Chamath Palihapitiya Special Purpose Acquisition Company (SPAC), Social Capital Hedosophia II.
Also leading real estate platform Zillow (NASDAQ: Z) (NASDAQ: ZG) entered the iBuying market, where a company makes a cash offer to a homeowner for a faster transaction in hopes of flipping the property after renovations and selling it for a good profit, a few Years ago. There is a new iBuying company preparing to go public: Offerpad.
Why is SPNV being merged with Offerpad?
Offerpad was founded in 2015 and currently operates in over 900 cities in 16 markets. The company has agreed to merge Acquisition company of Supernova Partners (NYSE: SPNV), a SPAC founded by Zillow co-founder and former CEO Spencer Rascoff.
Homeowners can request a cash quote for their homes on the Offerpad tech platform in minutes and expect to receive one for free within 24 hours. Alternatively, the homeowner can use a variety of Offerpad services to instead list their homes while keeping a backup offer in their back pocket.
Offerpad has carried out around 7 billion transactions to date. The company estimates it will have sales of $ 1.1 billion in 2020 and sales will grow to $ 1.4 billion by 2021. Offerpad expects to acquire nearly 6,500 homes and sell over 5,600 homes this year.
SPAC details of the Offerpad
The deal values Offerpad at approximately $ 3 billion in post-money equity. Supernova has $ 403 million in cash in its escrow account following its IPO last year, while SPAC has allocated an additional $ 200 million for PIPE (private investment in public equity) funding. Supernova’s subsidiaries will bring in an additional $ 50 million.
When you add it all up, Offerpad receives approximately $ 600 million in net proceeds after paying off some debt and covering various transaction costs. Supernova’s public investors will own approximately 12% of the combined company upon completion of the merger, which is expected in the second or third quarter.
The opportunities ahead of us
Offerpad estimates that the total addressable market is $ 1.6 trillion, while iBuying and online penetration account for less than 1% of that opportunity. The company claims to be more capital efficient than bigger competitors like Opendoor or Zillow. Over time, Offerpad also became more efficient as a lot of time was spent on renovations, optimizing its workforce and standardizing projects.
By the end of 2021, Offerpad plans to operate in 19 markets, with each market generating $ 500 million in revenue. In the long term, the company hopes to eventually operate in 48 different markets, gaining 4% market share for each for annual sales of $ 23 billion. Growth is expected to accelerate in the future as Offerpad expands into 5, 10 and 20 new markets over the next three years.
SPNV saw a muted reaction with stocks slightly above $ 10 per share, but Offerpad’s public debut has a lot going for it.
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